Introduction
Turkish economy has displayed a high growth performance in recent years as a result of decisively implemented structural reforms as well as successful macroeconomic policies; it has become one of the fastest growing economies in the world. The deep reform process undertaken by Turkey in the recent years has put the country in a unique virtuous cycle while maintaining its stability. In addition to the sound macroeconomic policies, Turkey has implemented a comprehensive and far-reaching structural reform agenda. Compared with the experiences of other countries, Turkey’s success has been remarkable primarily because of the speed with which it has conducted structural and institutional changes. Indeed, Turkey has made large strides in restructuring its financial sector as well as improving public sector governance and its business environment. Thanks to prudent fiscal and monetary policies as well as comprehensive structural reforms, economic fundamentals and balance sheets have strengthened considerably in recent years, making the economy much more resilient to adverse shocks.
As a result of sustained pace in growth, structural reforms and the process of macroeconomic stabilization, the EU emphasized the improvement in functioning market forces in Turkey. The accelerated reform process along with EU accession negotiations, robust private sector investments and favorable demographics promise a faster convergence with the EU during the negotiation process. The expected rise in participation in the labor force and vast productivity gains through increasing investments are predicted to be the driving engines of the convergence; these factors also guarantee sustained high growth.
Unlimited Freedom of Investment
Turkey’s benign investment environment has been a key factor in the country’s economic growth and development. The Turkish economy has had a steady growth rate for the last 26 quarters. The average real GDP growth rate, which was 2.4% during 1992-2001, reached 7 % during 2002-2007.
Real GDP Growth (%) / Nominal GDP($ bil) 2007
2002 / 2003 / 2004 / 2005 / 2006 / 2007 / Average annual
China / 9.1 / 10 / 10.1 / 10.4 / 11.6 / 11.9 / 10.8% / 3,280
India / 4.6 / 6.9 / 7.9 / 9.1 / 9.8 / 9.3 / 8.6% / 1,101
Turkey / 6.2 / 5.3 / 9.4 / 8.4 / 6.9 / 4.6 / 6.9% / 659
Poland / 1.4 / 3.9 / 5.3 / 3.6 / 6.2 / 6.6 / 5.1% / 422
Czech Republic / 1.9 / 3.6 / 4.5 / 6.3 / 6.8 / 6.6 / 5.5% / 175
Romania / 5.1 / 5.2 / 8.5 / 4.2 / 7.9 / 6 / 6.3% / 166
Ukraine / 5.2 / 9.6 / 12.1 / 2.7 / 7.3 / 7.6 / 7.8% / 142
Hungary / 4.4 / 4.2 / 4.8 / 4.1 / 3.9 / 1.3 / 3.7% / 138
Slovak Republic / 4.8 / 4.8 / 5.2 / 6.6 / 8.5 / 10.4 / 7.1% / 75
Source: IMF WEO October 2008
2007 / GDP (PPP) $ billion* / Global Rank / Population / Global Rank**China / 7,055,079 / 2 / 1,330,044,605 / 1
India / 3,092,126 / 4 / 1,147,995,898 / 2
Turkey / 902,619 / 15 / 71,892,807 / 17
Poland / 611,839 / 20 / 38,500,696 / 33
Ukraine / 320,762 / 33 / 45,994,287 / 26
Romania / 245,508 / 40 / 22,246,862 / 51
Czech Republic / 237,493 / 41 / 10,220,911 / 78
Hungary / 191,181 / 49 / 9,930,915 / 83
Slovak Republic / 108,935 / 59 / 5,455,407 / 110
Source: *World Development Indicators database, World Bank, 1 July 2008 ; ** The World Factbook 2008
Foreign Trade (Export + Import) (bil USD)2002 / 2003 / 2004 / 2005 / 2006 / 2007
China / 621 / 851 / 1155 / 1422 / 1760 / 2174
India / 114 / 142 / 195 / 252 / 317 / 393
Poland / 96 / 122 / 162 / 191 / 235 / 303
Turkey / 88 / 117 / 161 / 190 / 225 / 277
Czech Republic / 79 / 100 / 135 / 154 / 189 / 241
Hungary / 72 / 91 / 116 / 128 / 151 / 189
Ukraine / 35 / 46 / 62 / 70 / 83 / 110
Slovak Republic / 31 / 45 / 57 / 66 / 86 / 116
Ukraine / 32 / 42 / 56 / 68 / 83 / 110
Source: EIU
According to the 2008 World Trade Indicators published by the World Bank, Turkey has the 3rd least restrictive trade policies.
*TTRI (MFN applied tariff) - All Goods -This index summarizes the impact of each country's non-discriminatory trade policies on its aggregate imports. It is the uniform equivalent tariff that would maintain the country’s aggregate import volume at its current level (given heterogeneous tariffs). It captures the trade distortions that each country’s MFN tariffs impose on its import bundle using estimated elasticities to calculate the impact of a tariff schedule on a country’s imports. These measures are based on actual or current trade patterns and thus do not capture restrictions facing new or potential trade. They also do not take into account domestic subsidies or export taxes. Expressed as a tariff rate.
While one talks about foreign trade, it is imperative to mention about logistic, the key element for the transportation of the goods and services and facilitating cross-border trade. Turkey has a well-developed logistic infrastructure with the second largest TIR fleet in Europe. According to the World Bank’s Logistic Performance Index (LPI), Turkey ranks 34 in the world.
* The Logistics Performance Index (LPI) reflects the overall perception of a country’s logistics based on over 1,000 responses to a survey of logistics performance evaluated in seven key subcategories. These categories include: efficiency of customs and other border procedures, quality of transport and IT infrastructures, international and domestic transportation costs, ease of shipments and logistics competence, and tracking ability and timeliness of shipments. The value of the index ranges from 1 to 5, with a higher score representing a better performance.
Strategic Position
If you draw lines from Madrid to Beijing, from Moscow to Cairo, from London/Paris to New Delhi, they all pass through Turkey, which straddles a region where East meets West. Over centuries, a blending of hemisphere has been going on here – trade and cultural interchange – with Turkey smack in the middle.
Doing Business in Turkey
Turkey is one of the most liberal countries in the world with regard to doing business as well; Turkey outranks many developed countries in this regard. Turkey offers one of the easiest business start-up legislation in the world. With the introduction of the new FDI law, it takes only one day to establish a company in Turkey. Moreover, a new law is being drafted which will allow online establishment of companies.
Source:World Bank Doing Business 2009 *Undersecretariat of Treasury
Once you set up a company easily in Turkey, by the same token, you can effortlessly register your property as well. It takes only 6 days to register your property in Turkey.
Source:World Bank Doing Business 2009
Young, Skilled, Efficient, Dynamic and Cost-Competitive Labor Force: Engine of Growth
Ageing populations have been seriously hindering economic growth in many developed countries. Today, there are millions of young Turkish people providing developed countries with a pool of skilled young labor force. Almost one third of Turkish population is under age of 15.
Source: IMD World Competitiveness Yearbook 2007
A key component of investment is availability of skilled workforce. Turkey offers investors a young, talented, motivated and skilled workforce of 25 million. The Turkish labor market is one of the most skilled ones in the world, having the required qualifications, talents, dedication and motivation. This skilled labor force is capable of meeting the needs of the globally integrated and highly diversified Turkish economy.
Availability of Qualified Labor Force ScoresSkilled
Labor / FinanceSkills / Qualified
Engineers / Competent Senior
Managers / Language
Skills / IT Skills / Average Score
India / 6.4 / 7.5 / 7.57 / 6.1 / 6.93 / 8.75 / 7.2
Turkey / 5.52 / 6.26 / 6.65 / 6.17 / 5.52 / 7.57 / 6.3
Hungary / 5.83 / 6.39 / 6.96 / 6.09 / 3.48 / 7.83 / 6.2
Czech Republic / 5.03 / 5.33 / 5.52 / 4.67 / 5.24 / 7.47 / 5.5
Slovakia / 5.29 / 5.74 / 5.42 / 4.58 / 4.47 / 6.9 / 5.3
China / 5.58 / 6.5 / 3.77 / 4.04 / 4.65 / 5.81 / 5.0
Poland / 4.13 / 4.63 / 4.61 / 3.87 / 4.03 / 6.22 / 4.5
Romania / 3.28 / 3.51 / 4.96 / 3.09 / 6.08 / 5.36 / 4.3
Ukraine / 4.4 / 4.4 / 4.33 / 3.15 / 3.63 / 5.48 / 4.2
Scores (0: Not-Available, 10: Available); Global Ranking among 55 economies
Source: IMD World Competitiveness Yearbook 2007
A strong work ethic is an important component of the Turkish work culture. The workplace as an institution is cherished in Turkey because it allows individuals to utilize their skills and to work towards self advancement. The labor force’s dedication to work is shown via low absenteeism and its top ranked position among working hour rates per year.
*Global Ranking among 55 economies;Source: IMD World Competitiveness Yearbook 2007
*The labour cost of producing one unit of output (GDP) indexed to US=100 by the EIU. Defined with respect to real GDP per worker in PPP, and the average
*Percentage change in hourly wages in local currency adjusted for inflation, over previous year.
*Efficiency of labour measured in terms of output per worker (real GDP per person employed).
While the overall unit labor cost is way lower in Turkey than in rival countries’, the rate of labor productivity has been impressively higher than rival countries’ in the last 5 years. Lower labor cost together with increasing labour productivity is creating highly profitable opportunities for investors in Turkey.
Foreign Direct Investment
Turkey’s benign investment climate has yielded high results in attracting foreign direct investment. FDI flow into Turkey has tremendously increased by 1844 % from 2002 to 2007 with an average annual growth rate of 81 %, while rival countries lagged way behind Turkey. Net FDI inflows, which had averaged around $1 billion in the past, increased to $22 billion in 2007. Foreign investors have shown great confidence in investing in Turkey over the recent years. Turkey ranked the 20th among the top 25 investment destinations in the FDI Confidence Index 2007 prepared by AT Kearney. Moreover, according to the UNCTAD World Investments Prospect Survey 2008-2010 which was conducted among the largest 226 transnational corporations, Turkey is the 15th most preferred destination for FDI.
Inward FDI Inflows ( Millions of US Dollars)from 2002-20072002 / 2003 / 2004 / 2005 / 2006 / 2007 / Cumulative growth / Average annual growth
Turkey / 1133 / 1751 / 2785 / 10031 / 19989 / 22029 / 1844% / 81%
Ukraine / 693 / 1424 / 1715 / 7808 / 5604 / 9891 / 1327% / 70%
Romania / 1141 / 2196 / 6436 / 6483 / 11366 / 9774 / 757% / 54%
Poland / 4131 / 4589 / 13091 / 10363 / 19198 / 17580 / 326% / 34%
India / 5627 / 4323 / 5771 / 7606 / 19662 / 22950 / 308% / 32%
Hungary / 2994 / 2137 / 4506 / 7709 / 6790 / 5571 / 86% / 13%
China / 52743 / 53505 / 60630 / 72406 / 72715 / 83521 / 58% / 10%
Czech Republic / 8483 / 2101 / 4974 / 11658 / 6013 / 9123 / 8% / 1%
Slovakia / 4123 / 2160 / 3031 / 2107 / 4165 / 3265 / -21% / -5%
Source: UNCTAD World Investment Report 2008
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